Eurodollar University What Are Shadow Banks and How Do They Silently Control the World?
Jan 21, 2025
Explore the intriguing world of shadow banks and their growing influence in the financial system after the 2008 crisis. Discover how these institutions operate in the shadows, avoiding conventional regulations. The discussion highlights both the efficiency they bring and the serious risks posed by their lack of oversight. Delve into their role in past financial crises and understand the vulnerabilities created by our reliance on these unregulated players. Get ready for a revealing look at who truly controls global finance!
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Shadow Banking's Growing Importance
- Shadow banks play a crucial, yet opaque, role in the global financial system, exemplified by BlackRock and Rocket Mortgage.
- They've become increasingly important since 2008, filling the void left by traditional banks.
Shadow Banks: Not Your Typical Banks
- Shadow banks aren't traditional banks; they're investment firms and asset pools operating outside typical regulations.
- Money market funds, for example, arose to help banks bypass reserve requirements.
Shadow Banks and Intermediation
- Shadow banks operate a step removed from traditional lending, receiving funds from banks via wholesale markets then lending to end customers.
- Their specialized knowledge allows them to serve niche markets that banks may not.